The race is on to develop and dominate the green hydrogen industry. Investment is pouring into the industry as companies and governments alike push to produce a clean fuel that can be used in a multitude of ways, from heating to transportation. Europe initially appeared to be in the lead, but with big plans for the Middle East, Asia, and the Americas, this may be short-lived. So, with all the talk, what’s actually happening in the green hydrogen world, and which region of the world is likely to dominate the hydrogen market?
Experts are questioning whether green hydrogen could be the next space race, as governments around the world pump funds into renewable energy and technology innovations in a bid to secure energy security. While wind, solar, and hydropower operations have been up and running for years, energy firms worldwide are now exploring alternative forms of clean energy that will support the green transition. With many countries introducing laws to curb fossil fuel use, such as the banning of the sale of new petrol-fuelled cars from the 2030s, we will need new green fuels to ensure that transport, heating, and cooking can continue as normal – and green hydrogen just might offer the solution.
Several regions of the world announced green hydrogen strategies early on, including Australia, China, Germany, the EU, Japan, and South Korea. While most hydrogen is currently produced using natural gas, many regions are well on their way to becoming major producers of green hydrogen, having invested heavily in the construction of new plants in recent years. For example, China may be producing around 40 percent of the world’s green hydrogen by 2040, even though it accounts for little of the country’s hydrogen output today.
China has already established a regulatory framework for green hydrogen production, and its five main utilities have all invested in green hydrogen projects. And in Korea, the government released its Hydrogen Economy Roadmap in 2019, which aims to make Korea a major green hydrogen production hub by 2040. And one Asian power has long been thinking about hydrogen, with the Ministry of Economy, Trade and Industry of Japan having established the world’s first national strategy for hydrogen in 2017. The government has since released the Strategic Roadmap for Hydrogen and Fuel Cell, promoting both green hydrogen and ammonia production and use.
But Japan is not working in isolation in its big hydrogen plan, having signed a Memorandum of Cooperation (MoC) with the EU in December to drive innovation and develop an international hydrogen market. Japan’s Sumitomo Corp also signed a memorandum of understanding with Chile’s Colbun to produce a green hydrogen supply chain between Chile and Japan.
Latin America is fairly new in the world of green hydrogen, with high production costs having been a major deterrent for project development. The price of electrolyzers, as well as the need to set up renewable energy operations to run green hydrogen plants, has hindered industry development, with International Energy Agency (IEA) estimates suggesting the cost of an installed electrolyzer is currently between $1,400 and $1,770 per kilowatt. However, several countries, such as Chile, have launched a green hydrogen strategy, aimed at developing both investment in production and a market for green hydrogen use. By the end of 2021, there was a pipeline of more than 25 green hydrogen projects, with interest in the sector growing significantly in 2022.
Europe, which is expected to be the world’s main green hydrogen market, has been ramping up investment in green hydrogen projects, including several new plants across the region and a major green hydrogen corridor planned, which will link Spain with the Netherlands. The European Commission aims to produce 10 million tonnes of renewable hydrogen by 2030 and import a further 10 million tonnes. In terms of geopolitics, the EU fears China could come to dominate the hydrogen industry, just as it has with other forms of renewable energy, meaning that hydrogen strategies across Europe support both decarbonization and industrial policy.
One country that’s worried it’s falling behind in the global race is Australia. Guy Debelle, the director of Fortescue Future Industries, believes Australia’s natural renewable energy advantage in the race to develop a green hydrogen industry is at risk of being overwhelmed by “huge and aggressive” policy support in the US and the Middle East. He suggests new policies, such as President Biden’s Inflation Reduction Act (IRA), could encourage people to migrate to countries with greater funding opportunities in the field, with their expertise and know-how. He stated, “There’s a risk that, despite Australia’s great comparative advantages in green energy, the US and the Middle East are going to eat our lunch.”
This shows early on that not everyone can win in the green hydrogen race, although demand is expected to grow so much in the coming decades, – with almost 200 metric tonnes of the fuel needed by 2030 to be on track for net zero emissions by 2050 – perhaps there can never be too much green hydrogen output. Even if Australia does not become an international green hydrogen hub, the development of projects across multiple regions of the world could help ensure greater energy security, helping countries to reduce their reliance on other powers for their energy supply. This has long been an issue and is ever more present in the wake of the Russian invasion of Ukraine and subsequent sanctions on Russian energy.
We are far from seeing a clear winner in the green hydrogen production race. However, there are some clear contenders, as both Europe and Asia ramp up their investments in the sector and develop strong markets to boost future demand for the clean fuel. In addition, new climate policies, such as Biden’s IRA, could encourage greater migration to countries offering better funding opportunities, quickly changing the landscape of the global green hydrogen industry. Meanwhile, other powers with significant green hydrogen potential may well miss out if they cannot match these opportunities.